June 30, 2011

In the capital markets, data is the business. As such, data centers have been a major focus -- and expense -- for financial firms as data becomes an even more important part of every business decision. However, following a decade of data center expansion to handle growing business demands, the era of the new, enormous data center may have reached its end.

That is not to say that data centers are no longer needed, since the entire industry relies on the vast computing power, storage and reliability that come from these hubs of technology. Changing technology, coupled with cost pressures, are forcing financial firms — and companies in almost every industry — to reevaluate their data center strategies.

For instance, during the 2000s, most financial firms opened new data centers to accommodate the needs of their growing businesses. Citigroup opened a new data centers in the US and Germany late last decade. NYSE Euronext began planning two new massive data centers that opened in 2010, which replaced operations in as many as 12 other NYSE owned facilities. Wachovia opened two new data centers in Charlotte during the mid 2000s to handle its growing business, but is now part of Wells Fargo. Washington Mutual had multiple data centers before it collapsed and was acquired by JP Morgan. These mergers, coupled with a slow down in business (especially in the equities markets), leave redundant data centers and excess capacity at some firms.

The planning and development time for a traditional data center takes years and the cost is substantial, both to design and build and to eventually run. Meanwhile, newer technology, and the sluggish economy, are forcing companies to rethink their data center strategies.

Some firms are designing data centers that are smaller and modular, allowing for growth or contraction depending on business demands. Other companies are moving some of their processing and data needs to hosted or cloud-based offerings, which reduce computing requirements in traditional data center facilities.

In fact, NYSE Technologies, the commercial technology arm of NYSE Euronext, is using large portions of the exchanges two new data centers to offer a cloud solution, dubbed the Capital Markets Community Platform, to NYSE clients.

It's not to say that financial services data centers will disappear in the next few years, but it will be unlikely that large new data centers will be built, given economic pressures and the advancements in new technology.

ABOUT THE AUTHOR
Greg MacSweeney is editorial director of InformationWeek Financial Services, whose brands include Wall Street & Technology, Bank Systems & Technology, Advanced Trading, and Insurance & Technology.